The price of copper is trading today at US$3.24/lb on the NYMEX and over the past three months copper prices have recovered from the US$3.00/lb level. The recent price increase is a result of the rising demand for copper that has occurred from increasing growth in the US housing and auto markets, and an increase in worldwide manufacturing. In addition 50% of China’s copper demand comes from wire and cable producers whose operating rates are up 9.0% on a year over year basis. China’s investment in the power grid was up 20% in November on a year over year basis, and electric power line transmission is up 23% on an annual basis. The Chinese Government is developing a world-class electric power transmission system that will rival the rest of the world and this will result in rising copper demand over next decade.
Our demand outlook for the copper market is stronger than the recently released outlooks published by two major American banks who predict that the supply of refined copper will exceed demand until 2016. Thusly those two banks are predicting a copper price of US$3.00/lb over the next two years. We believe that the price of copper will rise to US$3.40/lb by the end of 2013 and to US$4.00/lb by the end of 2014. Furthermore, increases will take copper to US$4.50/lb by the end of 2015. We expect copper demand to continue its good growth given the infrastructure programs that will continue over next three years in China, India, Indonesia, and Brazil. Meanwhile, in the next three years we do not expect Europe to enter into a major recession, we are expecting that US economic growth will continue to improve, and Asia, Brazil, Turkey and Mexico will continue to record good economic growth rates.
We also do not agree with the two American banks and some of the other analysts that expect significant copper supply growth over the next three years. One major project has been delayed in Peru and another large project has been postponed in Philippines with the result that production from those projects will not reach the market before 2016. In addition a Chilean court ruled that construction of a new 740 megawatt coal plant in northern Chile could not proceed and this plant was being built for the sole purpose of providing electricity to new copper production. While we expect that the plant will pass the regulatory hurdles in the next couple of years’ time, we continue to see further delays in the development of Chilean mining projects due to the need for power and environmental approvals.
Companies that we follow in this sector that are not CHF clients include NovaCopper Inc. (TSX: NCQ), Tintina Resources Inc. (TSXV: TAU) and Curis Resources Ltd. (TSX: CUV).
CHF clients include Black Widow Resources Inc. (TSXV: BWR), Freyja Resources Inc. (TSXV: FRA), Mindoro Resource Ltd. (TSXV: MIO), Nuinsco Resources Limited (TSX: NWI), Pure Nickel Inc. (TSXV: NIC) and St. Augustine Gold & Copper Ltd. (TSX: SAU).”